Adam Smith Institute

I share Madsen's disappointment with Nick Clegg's refusal to back a referendum on the Lisbon Treaty (or EU Constitution, as honest people call it). Internationalism may be an important part of the Lib Dem creed, but there isn't much in the treaty that I would describe as 'liberal'. And it's strange that while the Lib Dems rightly back devolving more power to local government and individuals, they also support giving Brussels ever greater control over our lives and the policies that affect them.

On the other hand, Nick Clegg also made a very promising announcement on the future of the NHS yesterday, saying he would replace central government targets with 'personal entitlement's to high-quality care. A 'patient contract' would guarantee service and give people the right to private treatment if maximum waiting times are exceeded. As he put it in a Telegraph article, "That's how it works in Denmark – not to undermine the public system, but to guarantee individual care."

Quite so. Public services, in a sense, represent a contract with the public. In return for paying taxes, you are entitled to certain services. The trouble now is that the contract is neither explicit nor enforceable. If you get shoddy service in the public sector, there is not much you can do about it. You are certainly not going to get your money back. An enforceable patient contract, with an escape mechanism to the private sector, changes things. It ensures a high level of service for the individual, and it forces the public sector to raise its game.

Of course, we have been advocating this kind of thing for years (see Blueprint for a Revolution, for example) but it's always nice when politicians realise you are right. David Laws MP, the man in charge of Lib Dem public service reform policy, has promised radical thinking across the board, so let's hope there is more of this to come...

Yet again, the state is trying to assume control over our bodies. Last week it was Gordon Brown’s 'presumed consent' for organ donation, this week it is 'specific consent' over tissue being used for stem cell research.

The Human Fertilisation and Embryology Authority's bill would require specific consent from those whose tissue would be used for stem cell research, regardless of the date of tissue donation. That may sound reasonable, but as a letter to The Times from twenty-nine top stem cell researchers (including three Nobel laureates) put it:

…many existing cell and tissue samples and cell lines were donated, for any research purpose, by patients (now untraceable) with particular diseases, before this sort of research was even imagined. These cells have been well characterised over many years, or have unique properties and may therefore be the best samples to use for the derivation of embryonic stem cells. Such stem cell lines would be of great value in understanding how diseases develop, as well in the search for therapies.

Clearly people donating tissue or their entire bodies are interesting in progressing science and healthcare for the sake of others, but HFEA's proposed legislation will require a new bank of tissue will need to be created, costing hundreds of thousands of pounds, and more importantly – time. The bill also blocks any donations from children, regardless of consent, which means that some scientists whose research has already been approved will not be able to proceed.

Baroness Royall has told the House of Lords that ministers will reconsider the bill, but that they could not accept the amendments put forth by Lord Patel of Dunkeld, the chairman of the UK Stem Cell Network Steering Committee:

We believe the use of their genetic material to create cloned embryos or human admixed [interspecies] embryos is exceptional and requires exceptional consent.

One week consent is presumed, the next it is specifically needed. It seems as though the government can’t make up their minds about anything.

Two restaurant robbers in Melbourne have shot to international fame this week. After mistaking a bag of bread rolls for the day's takings, they made for the wrong get away car before one robber shot the other by mistake. In the buttocks.

Sometimes truth really is stranger than fiction... 

Government is inefficient, that we know. But just be thankful that you're not getting all of the government you're paying for.

On the subject of government, we now seem to have reached the age of the airbrushing of speeches. Can't have politicians making themselves look stupid now, can we?

Sometimes the stupidity cannot be hidden though. The effects of making sex illegal to buy in Sweden and of making it legal to sell in New Zealand. Which has the better outcome? And which is the UK Government proposing?  

Apparently most teachers agree with Tim Worstall of this parish. The educating to educate business is a waste of time. 

This giving software away for free idea: apparently it creates as much value per worker as Goldman Sachs does. 

The new Index on Censorship site: yes, freedom and liberty need to be protected with vigilance. 

And finally, more government. This is the UN's International Year of the Potato. 

Centralisation kills is the message of a new paper (should be here by the time you read this) from the Centre for Economic Performance. Centralisation, in this sense, meaning the setting of standard national pay rates.

What the authors did was look at the quality and productivity of nursing across the country, this being measured by the percentage of those admitted to hospital after a heart attack (AMI) who died in the subsequent 30 days. As we're all told so often of the connection between (relative) poverty and bad health we would expect the rates to be higher in poor areas. Quite the contrary: the richer the area surrounding the hospital the worse the survival rate. The reason for this is that nurses' wages are set centrally, to be the same (with very little geographic variation) right across the country. However, wages in general are not the same across the country: 

Pay for nurses and physicians in NHS hospitals, which provide almost all hospital care in the UK, is set by a central review body that sets pay scales in which there is limited regional variation. The variation that exists does not fully reflect the wages differentials in the external labor markets in which the staff are employed. Regional pay differences are considerable in the UK. For example, female white-collar wages in North East England are about 60 percent lower than in Inner London and these persist after controlling for human capital characteristics and other factors.

It isn't that wages are too high in low wage areas, but that they are too low for nurses in high wage areas. This leads to both a shortage of people willing to do the job itself and hospitals relying upon agency staff who are not constrained by the national pay scale: but agency staff are, by the very nature of their shift by shift employment, unlikely to know the systems and hospitals as well as permanent. The end effect is: 

A 10 percent increase in the outside wage isassociated with a 4 percent to 8 percent increase in AMI death rates.

That is, where hospitals cannot pay the going rate for trained staff because of the national pay setting, people die. All in the name of equality no doubt, for a job's worth the same amount of pay where ever it is to some people. The only solution to this is to abolish such national pay rates and allow local employers to pay what they need to attract the staff they desire.

All of which rather puts into perspective the current wrangles over national bargaining for police pay, other public sector workers, even the negotiations with civil servants and doctors. We shouldn't be having such national problems because we shouldn't be having such national negotiations in the first place. For centralisation of pay bargaining kills people.

Two engineering students were walking across campus when one said, "Where did you get such a great bike?" The second engineer replied, "Well, I was walking along yesterday minding my own business when a beautiful woman rode up on this bike. She threw the bike to the ground, took off all her clothes and said, "Take what you want". The second engineer nodded approvingly, "Good choice; her clothes probably wouldn't have fit you, anyway."

Ed - with this, his 1000th joke, Jokesmith is retiring from the ASI blog to pursue a career in stand-up. Apparently he was inspired by the late, great Bob Monkhouse, who famously quipped: "When I said I was going to be a comedian, they all laughed. Well, they're not laughing now..."

15. "The top rate of tax should be raised so that the rich pay more."

Higher tax rates do not necessarily mean that people pay more, or that more revenue is raised. It depends on other factors, including the total amount of money being taxed. It's all very well for politicians to talk of how they'd spend the extra money derived from raising the top tax rate to 50 percent, but the chances are that less money would be raised, and that they'd have to cut back on spending instead.

Higher tax rates have two important effects, among others. They make it worthwhile for people to avoid them by employing accountants to minimize their tax exposure via tax shelters, or to evade them by simply not declaring income and dealing in cash where they can. The former is legal, the latter criminal, but both mean a smaller tax base to levy the new rate upon. Both are encouraged by higher rates, and made less worthwhile at low rates.

The second effect is that earners have less incentive to work more. If they keep only half of any extra they earn, this is less of an incentive than if they can keep 60 percent. Extra effort and risk become less worthwhile, and people do less of them. Leisure, which costs you the money you could have earned by working instead, becomes cheaper and people take more of it. Some high achievers move abroad to escape the higher rates, and all of this makes the tax base smaller.

In fact well-judged tax cuts result in more revenue, and in the rich paying a larger share of the total. They pay at a lower rate, but pay it on more money. This happened in both the US and the UK with the 1980s tax cuts. The top earners ended up paying a higher proportion of the total tax take, and more revenue was raised.

The temptation of politicians to twist public policies for short-term gains in order to win votes is well known. Policy on cholesterol (pictured) is one such example. It turns out, according to accumulating evidence, to be a rather simplistic public scare. Reducing 'bad cholesterol' has been the mantra for decades and statins, which are just doing that, have earned $27.8 billion in sales in 2006. Little wonder since 13 million Americans and 12 more millions worldwide are using them to prevent heart attacks.

Because it attracts large numbers of voters, politicians keep shifting health resources to disease prevention – and thus draining away vital resources from the chronically ill, who are always a small minority. Yet new research shows that only one in 100 people, or according to some research even one in 250, who take statins over five years have any benefit whatsoever.

One reason is that healthy people have a different metabolism than chronically ill patients. Another is that bad cholesterol levels may no longer a reliable risk indicator for heart disease. For instance, Australian Aborigines have low cholesterol but high rates of heart disease. Spaniards have as much bad cholesterol as Americans but only half as much heart disease and the Swiss have even higher cholesterol but lower rates of heart disease. And now a different enzyme, called Rho-kinase, has been found that predicts heart disease much better.

This is just one example that exposes how government healthcare policies lag hopelessly behind science and are prone to blunder public health issues. And it will probably take much longer for government health programs to change course than the market would need to correct obviously biased research.

Installing metal detectors in schools: according to one teacher they'll manage to get the pupils in at about the moment when it is time to break for lunch.

Another rejection of the idea: on principle, not simple empirics. 

Comparative advantage , cooking and satirical argument. Is it really the business of society to iron out the unfair advantages of endowment? 

Comparative macro-economics. Germany has a budget surplus: not a bad thing to have at the beginning of a world-wide (possibly) economic turndown.  Something of a pity that the UK's economy wasn't managed similarly.

It would appear that physicists, when publishing papers, understand markets better than economists do when publishing papers: 

In addition, physics has a laissez-faire attitude about publication, believing that it is better to err on the side of letting as many new ideas in as possible, and to let the market eventually decide what is good and what is bad through a Darwinian process that selects what is useful and forgets what is not.

Hugo Chavez seems (again) to be picking every bad economic idea from around the globe to impose upon Venezuelans. We've known that this would all end in tears but it seems to be accelerating. 

And finally, the great econblogging debate of our times: did Adam Smith actually visit a pin factory or not? 

I'd not heard of Teach First until Andrew Leigh referred to it. Put simply, the idea is to take bright graduates, give them a few weeks of training to polish their educational skills and then stick them into bad schools. The schools that they find it very difficult to get fully trained teachers to go to.

On the face of it this seems absurd: for as we're constantly and consistently told, teaching is a profession, one which requires either a full degree in the subject or at minimum a one year post-graduate course after a non-education major degree. How could merely clever people pick it up in weeks?

Quite how well can they? Results from the American equivalent show: 

...research on Teach for America that suggests these teachers outperform other starting teachers, and even the more sanguine evidence (eg. work by Jonah Rockoff and coauthors) has Teach for America teachers being no worse.

An excellent result I think all can agree: the policy implication is therefore clear, make teacher training a 5 or 6 week course, close the vast majority of the educating to educate system, save a great deal of money and possibly improve the education system, or at least leave it no worse.

And remember, we're doing it for the children. 

A guy was walking down the street and saw Little Johnny smoking a cigarette.
He said, 'Kid, you're too young to smoke. How old are you?'
Johnny said, 'Six.'
The guy said, 'Six? When did you start smoking?'
Johnny said, 'Right after the first time I got laid.'
The guy said, 'Right after the first time you got laid? When was that?'
Johnny said, 'I don't remember. I was drunk.'

14. "The state is right to protect people from themselves."

People? That means you. Would you like to be protected from yourself? In the first case this means that the state has to take the decisions about what we do or do not need to be protected from. One step down this road and you are lost. The state might decide you need to be protected from smoking. If its scientists tell it that refined white sugar and salt are bad for people's health, it might protect people from those too. Maybe saturated fats, such as butter, as well. Maybe it should protect people from the physical inactivity which might harm them?

After deciding what it considers injurious to us, the state then takes the decision to protect us. It does this by preventing us from doing what we would otherwise have done. It can only do this by force, sanction, or the threat of the same. So the state takes away our freedom to do what we decide to do, and then uses force to make us do what it wants us to.

John Stuart Mill thought that only if someone causes or seriously risks physical harm to others should the state stop them. Should it prevent them using a dangerous bridge? No, he said. It can provide them with information, put up a sign and even urge them not to cross. But it is up to people themselves to assess the risks and take the decision. Some claim that the state knows better than we do. Unlikely, since there is no shortage of media sources telling us about what dangers we face.

And what about non-physical harm? People might be deeply distressed by your non-attendance at prayers, but that does not give them the right to constrain you into worship. The only safe rule is listen to advice, but make your own decisions and take the consequences.

The saying "buyer beware" never rings more true than when a purchase is being made on the black market. Especially when the market in question is that of illegal narcotics.

Of course, both parties seek to benefit from any free exchange, but drug transactions carry significant risks. The dealer could be arrested, or the purchaser could have an adverse reaction. Now a further risk has been added to the mix: the threat of being sued.

A Canadian woman who spent 11 days in a coma recently succeeded in suing her drug dealer. Apparently the dealer knew that the drug was "highly addictive and dangerous" but sold it to her anyway, in order to make money. (Really? I'm shocked...) This made him negligent, and liable for damages. In fact, the only reason why the case was successful was that the dealer refused to name the person in the distribution chain above him, thus moving the judge to reject his defence. The decision probably won't be too hard to appeal.

In any case, the person who has really been "negligent" here is surely the consumer, indulging in self-abuse via the consumption of drugs without regard to the harm that they can inflict. She should not have had recourse to sue. That she did is symptomatic of the ever-growing need to seek restitution from others for our own mistakes. We seem to be moving to a culture of blame rather than of individual responsibility.

People need to be made aware that sometimes, if not almost all the time, the buck stops with them.

One view of how the political system works: an auction of other peoples' money.

Another view: you really shouldn't take the tax subsidies, for if you do, you'll end up becoming captive. 

Yet another: at some point on Northern Rock someone is going to have to say that the hole is deep enough already, so let's stop digging. 

A fourth view: sometimes it really is true that the artist brings a clarity, a purity, to the description of life.  

A markets in everything moment: a futures market for gadgetry. You can pre-sell (or rather, buy an option to do so) your electronic gew gaws as you buy them. 

Sad new, PJ. O'Rourke is no longer funny. Worse, he's actually morphed into being a writer. 

And finally, The Dissident Frogman has found a way to become stinking rich. 

For ideological reasons, political reform of the NHS behemoth often seems impossible. Politicians across the spectrum, fearful to disturb the foundations upon which the NHS rests, hide behind platitudes, while MRSA haunts the hospital wards. However, cracks are increasingly showing in the system that no amount of political veneration can cover. The seeds of change are showing through, encouraged not from Westminster, but forced through by those that the NHS is supposed to be looking after: the people.

Earlier this week The Times' Daniel Finkelstein, reported the disgraceful case of Colette Mills and Debbie Hirst, two cancer patients who have both been refused the use of the cancer drug Avastin alongside their NHS chemotherapy, even though they are willing to pay for it out of their own pocket. Avastin has been shown to help cancer sufferers, but has not been approved by NICE because it is not considered cost-effective enough to be available on the NHS.

So why have Colette Mills and Debbie Hirst not been permitted to use Avastin alongside their NHS treatment? It has nothing to do with the drug's efficacy… In fact, the reason has nothing to with the drug… Actually, it has nothing to with health. According the the health secretary, Alan Johnson, they were refused because: "That way lies the end of the founding principles of the NHS". But when 'principles' stop the sick from getting life-improving drugs, are they really principles worth defending?

It has been obvious for some time that Johnson’s 'principles' are outdated. Following last year’s report entitled Free at the point of delivery: reality or political mirage, it is was generally accepted that a secret top-up system already exists. Politicians have duly responded by sticking their collective heads in the sand, preferring this to facing up to modern realities. Colette Mills and Debbie Hirst, like others before them, are seeking justice through the courts. They are unlikely to be the last. It's time the NHS's unworkable 'principles' were replaced with a more flexible and customer focused system of health care, one truly fit for the 21st century.